What You Need to Know About Filing Bankruptcy Chapter 13

Bankruptcy Chapter 13, more commonly known as reorganization bankruptcy. It is just as it sounds: reorganization of one's debt. Instead of having one's assets sold by a trustee to settle one's debts (Bankruptcy Chapter 7), one's debt is organized by the bankruptcy court and the debtor will pay a set amount determined by the bankruptcy court. Chapter 13 bankruptcy can also be referred to as a wage earners plan. It gives most individuals with a stable stream of income a chance to develop a plan to repay either part of their debts or all of their debts. Debtors present a plan of repayment with installments for the creditor for over three to five years. Giving that the debtor's generated income is less than a minimum required by the state, the plan of three years will take action unless the courts approve for a longer period

Eligibility for Bankruptcy Chapter 13

With the new bankruptcy laws passed, any individual or business filing for bankruptcy must complete a "means" test. The results of the means test indicates one's income and expenses. Here is what the bankruptcy courts will be looking at:

Total Income - Necessary Expenses = Net Income.

If one's Net Income is greater than the medium income of one's state, that person does have the option to file for Bankruptcy Chapter 13. If the Net Income is less, that person will be asked to file for Bankruptcy Chapter 7.

Debt repayment under Bankruptcy Chapter 13

The one of the huge advantages for anyone filing under Bankruptcy Chapter 13 is that the full debt owed to creditors will not be repaid. The debt that one must repay is determined by bankruptcy courts; they will be looking at one's total debt, and the net income as discussed previously. Some who have filed for Bankruptcy Chapter 13 are paying anywhere from 25 to 75 percent of their debt.

As mentioned before a debt payment plan will be determined by the court. A debt repayment plan proposal, drafted by the trustee (a bankruptcy lawyer or specialist) will be submitted to the court. The trustee will be monitoring one's business transactions and will ensure that the payment plan is being fulfilled.

Advantages to Bankruptcy Chapter 13